How to Rebalance Your Portfolio for the New Year: The Importance of Working with a Financial Advisor

The beginning of a new year is the perfect time to review and rebalance your investment portfolio. Over time, market fluctuations can cause your asset allocation to drift from your original investment strategy, potentially exposing you to unnecessary risks or reducing your expected returns. Rebalancing helps align your portfolio with your financial goals and risk tolerance. Partnering with a fiduciary financial advisor, like those at Duncan Williams Asset Management, can ensure this process is done effectively and in your best interest. Here’s how to approach rebalancing your portfolio for the new year:

1. Review Your Investment Goals

Before making any changes, revisit your financial goals. Are you saving for retirement, a down payment on a home, or your child’s education? Ensure your portfolio aligns with your timeline and objectives. If your goals have shifted, your target asset allocation may also need to be adjusted. The advisors at Duncan Williams Asset Management can help you evaluate whether your current strategy still aligns with your aspirations.

2. Assess Your Current Asset Allocation

Compare your current portfolio allocation to your target allocation. For example, if your goal is 60% stocks and 40% bonds, but after a strong stock market performance, your portfolio is now 70% stocks and 30% bonds, it’s time to rebalance. Duncan Williams Asset Management’s advisors can analyze your portfolio to identify deviations and recommend appropriate adjustments.

3. Determine What to Buy or Sell

To return your portfolio to its target allocation, you’ll need to sell assets that have overperformed and buy underweight assets. While it may seem counterintuitive to sell winners, this disciplined approach ensures you lock in gains and reduce exposure to potentially overvalued assets. A financial advisor at Duncan Williams Asset Management can guide you through this process, helping you make informed decisions.

4. Consider Tax Implications

If you’re rebalancing in a taxable account, be mindful of capital gains taxes. To minimize your tax liability, prioritize selling assets held for over a year to take advantage of long-term capital gains rates, or consider using tax-loss harvesting to offset gains. You can rebalance without worrying about taxes in tax-advantaged accounts like 401(k)s or IRAs.

5. Account for Rebalancing Costs

Rebalancing can incur transaction costs, such as brokerage fees or bid-ask spreads. To reduce these costs, consider redirecting dividends, reinvesting interest, or allocating new contributions to underweight assets. Duncan Williams Asset Management’s fiduciary advisors can help you minimize costs while optimizing your portfolio’s performance.

6. Reevaluate Your Risk Tolerance

As you age or experience life changes, your risk tolerance may shift. A younger investor may feel comfortable with a higher percentage of stocks, while someone nearing retirement may prefer a more conservative allocation. Duncan Williams Asset Management’s advisors will work with you to reassess your risk tolerance and adjust your target allocation accordingly.

7. Automate the Rebalancing Process

Many investment platforms offer automated rebalancing tools, but not all provide the tailored approach of a professional advisor. If you prefer a hands-off strategy, Duncan Williams Asset Management offers managed accounts that handle rebalancing for you, ensuring your portfolio stays aligned with your goals.

8. Diversify Across and Within Asset Classes

Rebalancing is also an opportunity to ensure your portfolio is well-diversified. Diversification reduces risk by spreading investments across different asset classes (stocks, bonds, real estate) and within those classes (domestic and international stocks, large-cap and small-cap stocks). Duncan Williams Asset Management’s advisors can help you create diversified portfolios tailored to your unique needs.

9. Set a Rebalancing Schedule

While the new year is an excellent time to rebalance, it’s not the only time. Aim to rebalance your portfolio at least once a year or when your allocation deviates significantly from your target (e.g., by 5-10%). Consistency is key to maintaining a disciplined investment strategy. Your advisor at Duncan Williams Asset Management can help establish a rebalancing schedule that fits your financial plan.

Final Thoughts

Rebalancing your portfolio is a vital step in maintaining a healthy investment strategy. Reviewing your goals, adjusting your asset allocation, and managing risks can align your portfolio with your financial objectives. With the guidance of Duncan Williams Asset Management’s fiduciary advisors, you can confidently navigate the complexities of rebalancing and help you achieve your financial goals.

Happy investing in 2025!

Disclaimer This article is for informational purposes only and should not be construed as financial, investment, or legal advice. It reflects the author’s opinions as of the date of publication and is subject to change without notice. The strategies and concepts discussed may not be suitable for all investors, as individual financial situations, goals, and risk tolerances vary.

Investing involves risks, including the potential loss of principal. Past performance is not indicative of future results, and there is no guarantee that any investment strategy will achieve its intended results. You should consider your own financial circumstances and consult with a qualified financial advisor, tax professional, or legal advisor before making any investment decisions.

This article does not constitute an offer to sell, a solicitation to buy, or a recommendation of any securities or investment products. The author and publisher disclaim any liability for financial losses or damages incurred based on the information provided herein. Readers are encouraged to perform their own research and due diligence before implementing any financial strategies.

Sources:

https://www.barrons.com/articles/rebalance-portfolio-reality-check-ff42faa9?utm_source=chatgpt.com

https://www.investopedia.com/vanguard-suggests-swapping-out-the-60-40-portfolio-for-a-40-60-allocation-8758879?utm_source=chatgpt.com

https://apnews.com/article/finance-portfolio-assets-investing-953e5673c109f3b1e779630e5b3be7b1

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